Thinking about retiring? Use this checklist to see if you’re really ready

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As we reported earlier this week, many people are putting off retirement, for fear that they’ll not have enough money to support them through their later years. So, how do you know when you’re ready to retire? Well, if you’re even considering retirement, here are some of the points you should probably have covered before you take the big leap.

1. Make sure you have the money
It seems everyone is an expert when it comes to knowing how much money you’ll need to live in retirement. While we’ve already busted the $1 million retirement myth, with ASFA standards working off skewed averages and the theory that, assuming you own your own home you can live off the Age Pension, there is a way you can test whether you’re ready to retire.

First, track your spending. This includes noting down all expenses, including rent, utilities, food, fuel and entertainment. No expense should be overlooked.

Then set a budget and live off it for a month. After the first month, try cutting back on your expenses by 10 per cent. Then do this for another one month. There’s a general rule that you’ll need about 80 per cent of your pre-retirement income to live in retirement, so, if you can live off 70 per cent, you’ll have a better shot at saving and covering yourself for emergencies.

2. Educate yourself
One cardinal rule that is broken by many retirees is knowing about their finances and how they work. This doesn’t just mean knowing how much you can save and spend. It’s knowing about how to use tax breaks, concessions and investments to your advantage, so that you can save and earn on a limited income.

If you’re a YourLifeChoices’ subscriber, you’re on the right track. It also pays to read finance blogs or the money section of a newspaper. Keep an eye out for free, financial literacy courses, either online, at adult education facilities or your bank or other financial institution. You don’t need a degree in finance, but it will help you to make better decisions that could potentially save you a lot of money.

3. Learn all you can about super
Let’s face it: the superannuation system can be insanely confusing. Again, if you’re a YourLifeChoices subscriber, you’ll probably have a better idea than most about how the system works. But changes to super rules, confusion about how super is taxed, knowing the opportunities available to you to help you maximise your super, and just how long your super will last can still be difficult to track.

First things first: learn the terminology, then track down any missing super, consolidate your accounts – both bank and super – and check your insurance cover to see that you’re not paying money for unnecessary fees.

And, if you become savvy enough with super, you may even be able to manage your own super fund, saving you a lot of money over the years.

4. Be as debt-free as possible
Many baby boomers will enter retirement with some form of debt. Ideally, when making the decision to retire, you’ll do so with as little debt as possible. At the very least, it’s probably best to have paid off your mortgage, because retirees who don’t own their own home will have a tough time of it in retirement.

5. Reduce your dependants’ dependency on you
Ideally you’ll have no dependants, but if you do, ensure that they’re in a good financial position so that your money can stay in your pocket. Discuss their situation with your partner or, at the very least, ensure you factor in any expenses that may arise from them, such as helping them with a home deposit, or paying for your grandchildren’s education. Figure out how far you’re willing to support them and ensure that you have the money to do so.

6. Ensure that you have affordable insurance
Make sure that you have decent affordable insurance. This includes, health, car, home and contents insurance. Allow for a 10 per cent increase in costs each year.

7. Account for worst-case scenarios
It’s a long shot, but what if your home is swept away by floods or a freak hailstorm punches baseball-sized holes in the roof of your car? If your insurance doesn’t cover such events, you could be in trouble. Make sure your house is in good condition too. Home maintenance is often a cost not accounted for by many retirees. Try to have a rainy-day fund or emergency fund set aside for any of these scenarios. You’ll thank yourself for it later.

8. Have another source of income
Sounds easy, right? If you have a second home, you can rely on rent payments to provide you with extra retirement income. You could invest in a small business, or become an online seller. Are you handy on the tools? Or a better-than-average seamstress, artist, or crafty type? Do you have a green thumb? These are all skills that could bring you extra income in retirement. If you learn the rules and play the system, you can earn a little extra and make your retirement more comfortable.

Do you have any advice for anyone thinking about retiring soon?

Article updated on 9 December 2019.

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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?

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20 Comments

Total Comments: 20
  1. 0
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    With the way the government changes legislation and creates penalties for planning, working, and saving towards one’s retirement the only worthwhile suggestion (maybe) on the above checklist is no. 4. The rest can be donated to the “poo bank”.

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      When considering what might be changed by the existing government or its replacement I would propose one principle: if it looks too good to be true it probably is and you should not rely on it. The foremost example in the public eye is franking credits. When you first heard of that scheme what was your first reaction? If your reaction was it is too good to be true, but then you allowed a financial manipulator to talk you into it, then you took on the risk and should not have been surprised that a prospective government would consider the scheme a rort and want to reform the rules. Surely no person on this site considers that reforming inequality is a bad thing. That is, you do not believe in your heart that those who are wealthy should exploit loopholes to consolidate wealth while treading on the heads of others to keep them poor. Does anyone believe that is an ethical aspiration for retirement?

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      When considering what might be changed by the existing government or its replacement I would propose one principle: if it looks too good to be true it probably is and you should not rely on it. The foremost example in the public eye is franking credits. When you first heard of that scheme what was your first reaction? If your reaction was it is too good to be true, but then you allowed a financial manipulator to talk you into it, then you took on the risk and should not have been surprised that a prospective government would consider the scheme a rort and want to reform the rules. Surely no person on this site considers that reforming inequality is a bad thing. That is, you do not believe in your heart that those who are wealthy should exploit loopholes to consolidate wealth while treading on the heads of others to keep them poor. Does anyone believe that is an ethical aspiration for retirement?

    • 0
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      Spot on! Wont be long & our super will vanish into thin air by some shitty means either (be it legalized robbery a la fees, charges (as per currently happens), economic disaster (in the future) or by scammers/hackers getting into the computerised system or accessing passwords etc. Hard when the system is geared to force everyone into putting money (wages salary sacrifice) into it by tax breaks etc -which are great if you get it back when you need it but not if it gets stolen (legally or illegally)! I’m 58 so that risk is lower but i fear for all the younger ones relying on getting their money back. After all a previous govt is said to have raided/drained tax money put away by taxpayers designed to fund pension system & used it for other purposes? Hard to trust corrupt politicians!

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      I agree. Just work out how much to need to retire between now and pension age and when you have enough then retire. It is stupid retiring with money unless a couple now has $2.5 million or more.

  2. 0
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    I totally agree with No1 – make sure that you have the money – all the other points above appear related ‘means to the end’, albeit optional rather than ends in themselves.

    Thankfully there is a lot more to retirement than affordability, meaning any early retirement decision may be foolhardy if a financial calculation alone. Having a clear idea what to do next is just as important. Nobody wants an affordable place on the scrap heap.

    As checklists go, this one looks worthy of The Donald – ie it seems to overlook a lot of important stuff. How about doing a follow up checklist covering all the non-financial considerations? Alternatively we could all just retire and build walls – Mexico will pay us.

  3. 0
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    So far, so good . . .but In Outer Orbit is right. Look to the day when you have to give up driving: how far are you from amenities, and no, you may not always be able to walk everywhere either. Is there public transport, and when you cannot manage that how far are you from the people who love and will help you?

    How about looking about for things that will absorb you, when you no longer have to get up and go to work, like hobbies and possibly U3A, a great institution. For those of you who have not yet met U3A, it’s the University of the Third Age. There are branches everywhere and they are open to all over the age of 55. No academic qualifications needed (nor are they gained in this country) and there are heaps of wonderful courses:Art, Photography, Philosophy, Crafts Current Affairs etc. You will meet a bunch of lovely people there too.

    Volunteering is another possibility and you don’t have to be very mobile to help children learn to read etc. You do need to get occupied though and even if you love reading and gardening and listening to music at home, outside social contact is essential.

  4. 0
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    One other thing to check that you did not mention. If you have lived or are from overseas check any Pension entitlements you may have either from the state or past employers. For example, we are entitled to part pensions from the UK that can be paid monthly or accumulate if you delay drawing down on it. Also my partner checked with a previous employer in the UK and discovered she had been paying into some fund as a kid and did not realise it ! It had been sitting there for thirty odd years compounding. She got a very nice lump sum as well as a monthly income indexed for life !

  5. 0
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    Number 2 & Number 8 are a concern! #2 is pretty hard to get head around so many Centrelink/pension info as it is so damn confusing & so broad depending on people’s circumstances (obviously jus as is designed by the a*holes holding the purse strings-a shame they don’t even need to worry about the system themselves so they understand the difficulty/complications of it)!

    Number 8 is ridiculous re owning a rental property (who can afford the upkeep/expenses of owning property or the rental money in bank as income for that matter!) Is hard enough to afford maintenance/repairs on own home/property without crap that goes wrong if someone is renting (as tenants have right to live in a cerain standard of home but a homeowner can & often do live in much lower standard if can’t afford to fix broken hotwater service or oven, shabby carpets etc) & the rental income only penalizes at tax time or can amass robodebt if income is declared (regardless of error declaring or error by Centrelink, not worth the hassle/complication!)
    Same with small business, with set up costs, insurances, etc etc – opens up robo debt & confusion declaring the income to Centrelink/affects pension etc if income too high or too low, or irregular fluctusting income amounts etc. Bring back the old days of cash wages etc!

  6. 0
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    If you wait to long before Retirement (Perfect Conditions) your Health/Well being could be at odds.
    Some need more than others, monetary and property.
    Just be Realistic as the older you are, Health is a Problem little comfort been “loaded” and you can’t enjoy the “Spoils”.
    Make Hay When The Sun Shines and Enjoy before you are unable.
    {;-)

  7. 0
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    Let us not forget this government still wants to get its hands on your money,i retire in 6mths according to my super but 1.5yrs according to the government a lot can change in 1.5yrs and what we have seen in the last 7mth is nothing compered to the next 2yrs I hope I am wrong

  8. 0
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    Having retired at 60, I agree with most things on this list especially no. 7. It’s very important to have a nest egg so you can replace your car, furniture etc. and cover unforeseen expenses. I think this was something we underestimated.

  9. 0
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    The comment about managing your own superannuation and saving money is very misleading, it will only save you money if you have a large amount. The latest figures I saw said that unless you have $500,000 it will actually cost you money.

  10. 0
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    Whats the point in getting ahead and owning a rental property for extra income in retirement when you do the government tells you that you have too much income or assets and you don’t get any pension..can’t win !

    • 0
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      Yes totally agree, not worth the bs & hoops you’d have to jump thru with Centrelink (who wants a Robodebt?) & no neg gearing (or other incentives)allowed now either?

    • 0
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      To work your pension out on gross rent from an investment property is simply ridiculous. Don’t they realise it costs money to rent a property and you are lucky if you get a few scraps after all expenses have been paid?

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